Create a debt reduction plan to gain financial freedom

Nationwide, consumer debt was $2.5 trillion in December 2011, but while that amount can be intimidating, reducing individual debt is possible.

Nationwide, consumer debt was $2.5 trillion in December 2011, but while that amount can be intimidating, reducing individual debt is possible, according to Fox Business.

People looking to repay their debts should pull a credit report at AnnualCreditReport.com, and then organize their debts in a spreadsheet recording the balance, rate, minimum payment and the number of payments left, Denise Winston, a financial educator and founder of MoneyStartHere.com told Fox Business.

“You will be amazed at how good you feel by simply knowing how much debt you really have and putting a plan in place to get rid of it,” Winston told Fox Business.

While the process can change depending on financial situation, the following are some tips that can help pay off several debts quickly.

Cut spending: Sell unused things at a yard sale, eat out less, use coupons and stop spending with the credit cards you are trying to pay off.

Pay the smallest debt first: This provides a psychological boost that helps you feel like you are making progress.

Pay off the highest interest rates: This cuts down the biggest interest payments that you owe, saving you more money in the long run.

Finish with the debt that has the lowest number of payments: Apply money that you were used to putting towards the already paid-off debts in order to finish paying this loan faster.

Once your debt has been paid off, set money aside for savings in order to prevent future problems.